As part of its thematic work into PPI the FSA is considering the action it will take to deal with ongoing non-compliant sales practices and consider actions to identify and remedy non-compliant past sales, using a range of regulatory powers at its disposal.
Jon Pain, managing director of the FSA’s Retail Markets, says: “Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes.
“Firms may wish to consider stopping selling single premium PPI sold alongside unsecured personal loans, given the continuing problems in the sales of this product.”
The FSA’s work on PPI included a mystery shopping programme that captured customer experiences of face-to-face branch sales of single premium PPI when sold alongside an unsecured personal loan.
The results showed very few customers were told that the cost of the payment protection would be added to the loan as a single premium and that interest would be charged on this amount.
Only half of customers said that they were told about the key limitations and exclusions of the policy – this is fundamental to establishing a customer’s need and eligibility.
And many customers were not told of both the monthly cost and total cost of their PPI – at the worst performing firms very few customers were given adequate information on the cost of their policy.
The FSA will publish a further update on the third phase of its thematic work in early 2009.
The FSA is considering the Financial Ombudsman Service’s concerns, raised in its wider implications letter, about PPI complaints and will be working with the FOS on the appropriate response to this serious matter, in the context of FSA’s broader strategy.